Timken Q4 Better Than Expected; Moves to GAAP EPS

A report released today by Wunderlich Securities describes the better-than-anticipated Q4 results of The Timken Company TKR. Reported revenue and GAAP EPS of $1.071 billion and $0.91, respectively, were higher than the Street's estimates of $987 million and $0.72, respectively. The relatively high numbers are credited to lower Q4 taxes. The Wunderlich report states that despite TKR's favorable Q4 results, shares declined when they were released. This behavior is attributed to the Street's adjustment to TKR's 2011 GAAP forecast. Street EPS estimates had previously been non-GAAP and as such they accounted for forecasted future restructuring charges which the company said will be essentially irrelevant in 2011. The Street has assumed larger charges, leading to a declined estimated 2011 EPS. Wunderlich analysts predict that Timken will trade at the higher multiples of its competitors once the company improves profitability. Given by 2012 estimates, Kaydon KDN trades at 17x and RBS ROLL at 15x while TKR trades at 12x. Wunderlich analysts give Timken a Buy rating with a price target of $60. It is trading at $48.14.